Telstra flags job losses as profit, dividend falls

Telstra chief executive Andrew Penn has blamed the national broadband network (NBN) for potential job cuts as the phone company attempts to transform itself into a tech business.

As he unveiled a 5.8 per cent fall in half-year net profit to $1.7 billion and a sharply lower dividend on Thursday, Mr Penn flagged "reducing and disappearing" jobs in parts of the business, in large part because of the NBN.

Telstra has dropped its dividend to 11 cents.

While Telstra was "always sensitive to anything that we're doing that has an impact on jobs [...], we do need to increase the efficiency of the business, the productivity of the business, because ultimately that’s what’s going to make us successful," he said.

This meant changing the workforce of the company, particularly due to the NBN, as Telstra moved into new technology and redefined its role in the market, he said.

Advertisement

Telstra has estimated the roll-out of the NBN will cost it $3 billion a year in lost earnings from 2020 onwards.

Mr Penn said the company was making investments in new technology and 5G because "regardless of the NBN, they’re the right thing to do for the future of our customers and our shareholders", but it was "critically important because we need to find ways to mitigate and offset the negative economic impact of the roll-out of the NBN".

Loading

While its traditional telco jobs might be reduced, he said Telstra was creating jobs in new business areas such as cyber security and the Internet of Things, which allows devices and appliances around the house to be controlled online.

The company was "investing heavily in new skills" for its workers to make those transitions.

"I want to make the point we will be making new work as well as making new roles," Mr Penn said.

Losing market share

The six months to December 31 was the third consecutive half in which Telstra lost market share to Optus, Citi analyst David Kaynes said. Over the past 18 months, Optus added 520,000 post-paid subscribers, compared to 299,000 for Telstra.

Mr Kaynes said this was due to Optus growing faster, rather than Telstra declining.

However, falling post-paid average revenue per user and declining mobile profit margins meant Telstra needed to get "more aggressive on price".

"In general, what's surprising is how quickly the core earnings are falling and it's really hard to see where they're going to find the growth," he said.

Telecommunications consultant Paul Budde said it was a "reality" the NBN would take over part of Telstra's business.

"Over the last two decades Telstra has made numerous investments in tech but they have very little to show for [them]," he said.

He couldn't think of "any incumbent around the globe" that had managed to successfully change itself into a technology company.

Dividend slashed

Telstra slashed its dividend by more than a quarter to 11 cents a share for the December half, as flagged in August, in a blow to about 1 million investors, many of them mum and dad shareholders and self-funded retirees.

The profit decline, which came despite a fall in fixed costs and an increase in subscribers on mobile and fixed connections, was largely due to a $273 million non-cash impairment of its US streaming video arm Ooyala.

In 2014, Telstra upped its stake to 100 per cent in the start-up, which was once considered to be the next YouTube, but media companies shifting to their own technology left some of its services redundant.

Without this impairment charge, profit would have increased 9.5 per cent to $2 billion, Telstra said.